Pentagon gambles on savings

2012 Procurement Plan Hinges on Overhead Cuts

Feb. 22, 2011 - 06:00AM
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Pentagon acquisition executive Ashton Carter said the DoD had been "quite conservative" in its "programmatic projections." (Tom Brown / Staff)

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Analysts see great risk in the Pentagon's 2012 budget proposal, which bets procurement plans on the services' ability to squeeze billions of dollars from overhead and other spending. But the military's acquisition chief says Defense Department planners are playing it safe.

"We were actually quite conservative in our programmatic projections," DoD acquisition executive Ashton Carter said during a Feb. 18 taping of This Week in Defense News. "We did not book the entire estimated savings ... and we'll only book them as our confidence in them grows."

Carter said DoD could find more efficiencies when contracting for services and through the implementation of his Better Buying Power initiative unveiled last year.

But analysts said executing the plan to save more than $150 billion between 2012 and 2016 will be difficult.

"They would be lucky to achieve what they plan to do," said Todd Harrison, a senior fellow for defense budget studies at the Center for Strategic and Budgetary Assessments.

And if the savings don't materialize, they say, it could mean deep cuts to programs, end strength or even DoD's roles and missions.

$671B Top Line

On Feb. 14, DoD sent its $671 billion 2012 budget request to Congress, a total that includes $117.6 billion in Overseas Contingency Operations (OCO) funding for the wars in Afghanistan and Iraq.

It slates $113 billion for procurement; $75.3 billion for research, development, test and evaluation; $204.4 billion for operations and maintenance; $13.1 billion for military construction; $142.8 billion for personnel; $1.7 billion for family housing; and $2.7 billion in revolving management funds.

The request also contains DoD's five-year spending outlook, which includes plans to spend $571 billion in 2013, $586 billion in 2014, $598 billion in 2015 and $611 billion in 2016. The figures do not include planned requests for supplemental, or OCO, funding.

"This is a budget that grows modestly ... in real terms" between 2012 and 2016, Pentagon Comptroller Robert Hale told reporters Feb. 14.

As Pentagon planners worked on the request, the services were instructed to find ways to save money that could be plowed into weapons procurement. They responded with promises to save a collective $178 billion over five years.

The original idea was to put $100 billion of that toward procurement, but increased operations and maintenance costs trimmed procurement's share to $70 billion, according to Clark Murdock, a senior adviser at the Center for Strategic and International Studies.

Yet even that amount may be at risk, said CSIS senior fellow Maren Leed. For example, the Pentagon intends to shrink the number of contractors, even as it freezes civilian hiring. Yet the workload will not decrease.

"That leads me to believe that some of the efficiencies that we're counting on from those reductions aren't likely to materialize," Leed told reporters Feb. 16.

Worse, she said, the 2012 budget "didn't really take on a lot of the tough issues facing the department, and that suggests that the harder choices are really in the coming years."

Leed said DoD did not adequately address one of the biggest budget problems.

"It is clear that if the current trend of cost and military personnel continues, that it will increasingly crowd out other things, and it has already done that to a certain extent," she said. "That's a problem that is only going to get worse."

Harrison characterized military personnel as the big winner in the 2012 budget and procurement as the loser. The Pentagon's budget request last year pegged 2012 procurement coffers at more than $120 billion. Research-and-development funding fell nearly $800 million in 2012, compared with the 2011 request.

"It's hard to take a procurement holiday from the holiday we're already on," Leed said, adding that the military cannot reduce its force structure given the number of troops deployed in Afghanistan and Iraq.

"Given those constraints, it's not particularly surprising that they didn't make any really dramatic changes," she said, "but I'm a little concerned about things that they did not do and may have overpromised in some things that they did do."

Gates Testifies

In what he called his final budget testimony on Capitol Hill, U.S. Defense Secretary Robert Gates acknowledged that Congress is facing even more challenges down the road as many of the Pentagon's ships and aircraft reach the end of their service lives in the 2020s.

It will be tough to find the money to reach the Navy's goal of 313 warships, Gates told the House Armed Services Committee on Feb. 16. He questioned whether the Air Force would be able to afford new aerial refueling planes, the F-35 Joint Strike Fighter and a new bomber in the mid-2020s.

Early in the week, Gates warned of a looming crisis, should Congress fail to pass its long-overdue 2011 Pentagon spending measure. For nearly five months, DoD has been operating under a continuing resolution (CR). Slated to expire in early March, the resolution limits Pentagon spending at $526 billion, $23 billion below its 2011 request of $549 billion. Gates told reporters Feb. 14 that DoD could get by with a $540 billion appropriation if it would advance the measure.

Carter said the continuing resolution was costing the Pentagon serious money.

"I would say in terms of the economic inefficiency attendant upon starting and stopping things ... I think there are billions of dollars that are being wasted by having to operate under a CR," he said.

Hale, the DoD comptroller, said that if a continuing resolution is extended to cover the full year, "bad things would occur."

"We won't have enough funds to meet our national security commitments," he said. "We won't have enough flexibility. For example, we can't have any new starts under this CR, nor can we have any increases in procurement rates."

Although House lawmakers introduced a new 2011 defense spending measure on Feb. 11, Hale said the Pentagon is "concerned that the funding levels in that bill are quite low," even though the top line is higher than the continuing resolution.

Sens. Susan Collins, R-Maine, and Bill Nelson, D-Fla., recently penned a missive to Senate leadership urging them to take up the 2011 defense appropriations bill, according to Collins. "It's a disaster, and there's just no need for us to be debating a bill that isn't urgent when we should be doing a high-priority bill," she said during a Feb. 17 Senate Armed Services Committee hearing. "Certainly the passage of the defense appropriations bill is the highest priority."

The Pentagon's 2012 spending request does not include funding for the F-35 alternative engine program. However, Gates said the Pentagon would continue funding the program on a month-by-month basis to give Congress more time to debate it, along with the rest of the 2012 budget. The initiative is costing $28 million per month, Gates said, noting he "will look at all available legal options to close down this program" once the continuing resolution expires. The U.S. House voted to kill the program Feb. 16.

The Air Force would be able to award its much-anticipated KC-X next-generation tanker contract if a continuing resolution is in place since Congress appropriated funding for that program in 2010, according to Hale.